Canada-US border-crossing delays are decreasing.

The longest undefended border in the world-that between the US and Canada-stretches 5,061 miles over land and 3,832 miles over water, and it is rapidly becoming a border for sovereignty reasons only.

The terms of the North American Free Trade Agreement (NAFTA) have progressed far enough that shipping goods from Canada to the United States and vice versa is almost as easy as shipping goods from Minnesota to North Dakota. Most tariffs and barriers to trade have been lifted, but the one sticking point remains: Customs clearance.

Streamlining the System

"Streamlining customs clearance is something both sides are working on," says Ron Merrick, consul and trade commissioner at the Canadian consulate in Los Angeles. But, he points out, "You can't do it in isolation. It involves both sides working in harmony. You can't do it on one side without doing it on the other."

According to sources in the cross-border transportation industry, Canada's customs service has made greater strides than has US Customs in clearing goods expeditiously. The primary reason is a certain xenophobia alive and well in the US Congress-which leads to restrictive legislation or delays in lifting restrictive legislation-as well as a greater fear on this side of the border concerning illegal drugs.

Even with these drawbacks, however, US Customs is moving ahead with various paperless clearance programs, and carriers expect the situation to get better relatively soon.

Some carriers are not waiting for official, across-the-board action, however. They are working individually with Customs on both sides of the border to streamline the process.

Getting LTL Shipments There Faster

A truckload of automobile parts can usually get from Detroit into a Windsor warehouse in a heartbeat. But a trailer with a less-than-truckload cargo can often spend hours idling away its fuel before moving on.

"It's relatively easy to design [clearance] systems for one or two or three shipments per truck," says Beverly Brookman, international administration manager for Roadway Express at its Akron, Ohio, headquarters. "But when you're talking about 20 or 30 or more, it gets a little more complicated."

As a result, Roadway and Canadian Customs are working closely together to develop a Customs-clearance system for LTL shipments. Brookman says they're making great progress in that direction, adding, "We're excited about it. We see it as the wave of the future for North American border crossings."

Brookman lauds Canadian Customs for its readiness to create expeditious systems. "Canada Customs has been quite the leader in North America with their ideas about what Customs can do and what government can do to make things efficient for all the parties involved, not just for them," she says.

On the US side, Brookman says, Customs is coming along well with its International Trade Data System (ITDS), which will be an enhancement of the current Pre-Arrival Processing System (PAPS). The US PAPS is very similar to Canada's Pre-Arrival Release System (PARS).

ITDS will greatly reduce the paperwork needed for cross-border shipment of goods into the US. Brookman says, "Over a number of years, 104 agencies will share this data," which will streamline the system for shippers. They're starting with only four.

"Shippers will still have to provide the information, but it's less likely over time that they'll have to provide the same information on three different documents," she says. "It all means that carriers will not have to spend so much time at the border-we're talking about the difference between several hours and just minutes."

She concludes, "Anything that moves more quickly, in the long run, if it's more efficient for carriers, that efficiency should pay off for shippers, too."

Freedom in the Air

Air freight is also benefiting from various Customs-clearance advances. Air Canada, for example, has developed a "wheels up" clearance program with Canadian Customs to expedite shipments into Toronto from the US.

"It's for all flights two hours or more," explains Steve Gibbs, senior director of corporate sales for the US and Latin America in Air Canada's Chicago office. "It allows people to get their goods much, much quicker because they don't have to wait for approval."

Altogether, Gibbs says, "There's a lot going on in Canada in terms of Customs clearance. It's having a positive effect on air freight."

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The Non-Resident Importer Advantage

by Julie Luceno

Canada's business practices, attitudes, and conditions are closer to those in the US than those of any other country in the world. Its geographic proximity reduces transit times and costs. Common language, corresponding time zones, and undefended borders all add to the ease with which US companies can expand their markets into Canada.

For these reasons, there is a growing trend among US companies to register for a business number with the Canada Customs and Revenue Agency (CCRA) so they can become a non-resident importer (NRI) to Canada.

A non-resident importer is a company that does not have a Canadian presence, yet imports into Canada from the US under its own company name. In essence, a non-resident importer is both the exporter from the United States and the importer of record into Canada.

Reasons for Being an NRI

There are three primary reasons for US companies becoming NRIs:

First, these companies recognize the potential the Canadian market has to offer. They also know that to effectively compete for Canadian market share they need to make the buying experience from a US supplier as easy and cost effective as buying from a Canadian supplier. This means including logistics costs in the price of the product (duties and taxes, customs clearance and product movement), and assuming responsibility for shipping to their Canadian customers.

Second, many Canadian customers are now demanding that US suppliers ship to them "delivery duties paid" (DDP). This means that their US suppliers are required to become the importer of record, or non-resident importer. Those suppliers who are not set up as an NRI lose out on potentially lucrative contracts in Canada.

Third, many US companies in search of reducing operating expenses view NRI status as an attractive option. In some cases, companies are closing down their Canadian operations and operating as an NRI because it is a more cost-effective supply-chain approach. In pursuing Canadian importer status, they are free to develop new supply chains to the Canadian market while, at the same time, maintaining high customer-service levels.

Ignoring or resisting this trend can lead to a competitive disadvantage to vendor sales on both sides of the border. Today, many companies are establishing North American strategic buying centers, and are selecting suppliers who can meet their needs on both sides of the border. These strategic buying centers do not want to undertake the responsibility of arranging customs brokerage and transportation to their Canadian subsidiaries. Offering these strategic buying centers the option of buying from a NRI can lead to a significant competitive advantage for a US vendor.

Taxes and Record Keeping

Some companies continue to resist this NRI trend because of the prospect of having to pay the Canadian Goods and Services Tax (GST) and having to maintain records relating to imports into Canada have caused US exporters unnecessary hesitation. But these aspects are not as onerous as is often thought.

A non-resident importer must pay a 7% value-added tax known as the Goods and Services Tax (GST) on goods imported into Canada, but US companies registered as NRIs can recover 100% of the GST paid to the CCRA.

All non-residents are required to maintain records of their importation. The Canada Customs and Revenue Agency (CCRA) regulations stipulate that proper records must be maintained in Canada for a period of six years following the importation of the goods. All records for transactions relating to the origin, purchase, importation, costs, value, payment, and disposal of goods in Canada must be kept so a CCRA officer can audit them, if necessary. A non-resident importer has the option of having a third party, such as a customs broker or other party, maintain these records in Canada on its behalf, or it can apply to the CCRA for permission to maintain them in the US.

Luceno is marketing manager of the Canadian Import Solutions division of Livingston International, Toronto, Ontario, Canada.

E-mail: Jluceno@livingstonintl.com.